Dan Loeb Takes a Stake in Dow Chemical

Dow Chemical Co. hasn’t quieted activist shareholders with its plans to carve up the company, announced in early December.

Activist investor Dan Loeb, the founder of the hedge fund Third Point, revealed Tuesday morning that he holds a new stake in Dow Chemical. In a letter to investors released on the Harvest Exchange, a website for sharing investor ideas, he noted that Dow Chemical is currently Third Point’s largest current stake,, but didn’t disclose his actual position.

In early December, Dow announced plans to exit low-margin performance chemical operations, but for Third Point, that’s not enough. The hedge funds is calling for a more dramatic split of the units that turn oil and gas into chemicals from the unit that makes
higher-margin specialty chemicals used in agriculture, food, pharmaceuticals, and electronics.

Mr. Loeb called Dow Chemical to engage outside advisers to see if the chemical company’s current plan to carve out $5 billion of its commodity chemicals business is the right one. ”The review should explicitly explore whether separating Dow’s petrochemical businesses via a spin-off would drive greater stakeholder value,” Mr. Loeb wrote in a presentation.

“Dow shares have woefully underperformed over the last decade, generating a return of 46% (including dividends) compared to a 199% return for the S&P 500 Chemicals Index and a 101% return for the S&P 500,” he wrote. “The company’s weak performance is even more surprising given that the North American shale gas revolution has been a powerful tailwind for Dow’s largest business exposure – petrochemicals,” Mr. Loeb added.

Shares of the company spiked nearly 7% Tuesday morning after Third Point announced its stake.

Since Dow Chemical announced plans to spin out its commodity chemicals company in early December and before Tuesday’s rise, shares had popped more than 10% compared to a roughly 2% increase in the S&P 500.